All you need to know about Risk management in Fintech

Amy Wilson May 29, 20194 mins read

Technology has been a huge area of growth in the last decade and has helped boosted all industries.

In the last few years, Fintech companies has emerged and grew rapidly especially in Singapore by making use of technology as a solution and tool to increase business efficiency and customer experience. 

What does ‘Fintech’ means? 

Firstly, what is Fintech defined as? The term “Fintech” has been more commonly used in this age and time as every financial institution and tech companies are trying to get a piece of that lucrative pie.

On a broader term, Financial Technology – better known as the term ‘Fintech’ is perceived as where an organisation’s main objective is to provide a wide range of financial services by making use of software and modern technology. 

In 2019, the bulk of Fintech companies directly compete with the brick and mortar banks in most areas of the financial industry to provide a one stop service to customers. This will most often include customised investment, lending, payments services and products of financial services. In Singapore, mostly due to regulatory factors and their large internal structures, most of the banks struggle to be on a similar pace with Fintech start-ups in regards of their innovative ideas.

The idea of 100% digitalisation appeals largely to the millennial’s, people who are born from the early 80's to 90's and the new generation have a strong preference to easy and queue-free banking services instead of waiting in line for hours in a branch which includes speaking with bankers and lengthy consultation processes. 

Classification of Fintech solutions 

There are more than 490 Fintech companies in Singapore now. Entrepreneurs from all around the world are very attracted to Asia especially Singapore being one of the financial hubs in Asia. 

There are a range of different types of Fintech solutions which ranges from Payment solutions, Lending solutions, Data analytics, Cryptocurrency, Enterprise Management systems, Crowdfunding, Trading and fund management, Cloud, Blockchain and many others on a smaller scale. 

The few most prominent ones in Singapore are these 3 types of Fintech services.

  1. Payment Services: Highly competitive and important due to the need for competition in Banking. One of the biggest subsectors in Fintech. 
  2. Lending services: Frequently known as peer to peer lending (P2P lending or P2B) functions through a digital platform that matches lenders with potential borrowers, allowing lenders to potentially gained much more attractive returns than a savings account or other investments, and borrowers, lower interest rates than at a traditional financial institution.
  3. Blockchain technology and AI: By utilising technology to provide trading, exchange, new generation financial services 

Type of Risks

Due to the speed of changes and innovation, new risks are constantly emerging. 
Cross-border transactions are usually at a fast-transactional speed which is a powerful tool of Fintech but will also require Fintech firms to adapt stronger risk measurements that will match such speed and pace. Some of the risk that must be properly manage are listed below:

  • Fraud Risk 
  • Merchant Risk
  • Regulatory risk 
  • Anti-money laundering and countering terrorist financing
  • Consumer Risks
  • Cybersecurity and Data Privacy
  • Credit risk and operational risk
  • Outsourcing Risk 

The importance of Risk management must be the initial point for Fintech firms when dealing with risk and compliance matters. With the rise of new Fintech firms, it also means new risks and challenges that must be addressed appropriately. Risks may represent themselves in various forms. With the rapid pace of innovation, not only does it pose challenges to Financial Institution but also to the regulators.

Challenges of retaining Talents in Fintech

It will be highly challenging to bring onboard a strong risk professional to identify such emerging risk as this is still a growing community. Retaining and attracting high quality talents seems to be the most prevailing talent faced by Fintech as there seems to be a smaller pool of talents in Asia. 

One proven solution is to bring onboard potential junior risk professionals and train them up on the risks to be taken in a Fintech firm however of course such method takes time and depending on the scale of the company it may not be advisable to wait due to the important of Risk and Compliance roles in a Fintech firm.

Talent needs

Over here at Morgan McKinley, we work closely with all types of Fintech firms ranging from start-ups to the most established global Fintech firms. We have proven ourselves to be a strong talent provider to organisations who value and understand the importance of good talent. As a specialist Risk recruiter, I have seen high demand for risk talents in Fintech this year and if you are a potential employer seeking professional recruitment needs, do reach out to me for a chat or if would like to understand more on the strong talents we work with. 

For any strong risk professionals, I’m always hiring for Risk management roles in the Banks and Fintech space thus if you are looking to explore any job opportunities or just to understand the current landscape – please reach out to me for a confidential discussion.

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